Flytrex Secures $40M to Expand Drone Delivery in US Suburbs

Flytrex Secures $40 Million to Expand Drone Delivery Service

Flytrex, an Israeli company collaborating with major retailers like Walmart and Chili’s, has successfully raised $40 million in funding. This investment will fuel the continued development of its drone hardware and software.

The company is also focused on forging new business partnerships as it anticipates receiving regulatory approvals for broader service expansion across the United States.

Leading the Drone Delivery Landscape

While companies such as Amazon are independently developing their own drone delivery systems – known as Prime Air – Flytrex asserts that its current pilot program in North Carolina represents the largest operation of its kind.

However, this is viewed as merely the initial phase of a more extensive delivery network and fleet. Flytrex is strategically pursuing certification from the Federal Aviation Administration (FAA), aiming to classify its drones as commercial aircraft.

This approach is intended to maximize flexibility in the design and operation of its business model over the long term.

FAA Approval and Expansion Plans

“We anticipate achieving national approval by the first half of next year,” stated Yariv Bash, co-founder and CEO of Flytrex, during an interview.

“Our application with the FAA, initiated over a year ago, is currently under review.”

Flytrex initially participated in the UAS Integration Pilot Program (IPP) – where UAS stands for unmanned aircraft system, encompassing drones – which concluded in October 2020.

The company is now progressing with the BEYOND initiative, collaborating with the North Carolina Department of Transportation to address the remaining challenges associated with UAS integration.

Current Capabilities and Future Potential

Currently, Flytrex is authorized to operate within a one nautical mile radius in North Carolina. However, the drones developed by the company possess a range of three miles in each direction.

Expanding operational range is a key objective for future service offerings.

Investment Details and Strategic Backing

This Series C funding round brings the total amount raised by Flytrex to $60 million.

BRM Group spearheaded the investment, with contributions from OurCrowd, Lukasz Gadowski, and existing investors including Benhamou Global Ventures (BGV), btov, and BackBone Ventures.

Notably, Lukasz Gadowski, founder and chairman of Delivery Hero – a prominent global online food delivery platform – is a strategic investor.

Potential Partnerships with Existing Delivery Services

While Delivery Hero is not currently collaborating with Flytrex, Bash indicated that the startup envisions potential partnerships with established on-demand delivery platforms like DoorDash and Delivery Hero.

These brands could integrate Flytrex’s drone delivery capabilities to supplement their existing fleets, rather than independently developing their own aerial delivery infrastructure.

The Focus on Commercial Aircraft, Not Drones

Flytrex has established itself and is gaining momentum with both customers and investors based on a straightforward concept.

Currently, on-demand delivery utilizing bicycles and automobiles is beginning to demonstrate positive unit economics in densely populated urban environments; the key lies in combining multiple orders or ensuring routes are short enough for drivers to complete numerous deliveries within a workday.

However, this model proves less effective in more dispersed residential areas, like suburbs—particularly when the delivered item, as Bash explains, is a relatively inexpensive purchase like a $5 burrito. The cost of dispatching personnel to both restaurants and customers, coupled with associated fees to offset the burrito’s price and courier expenses, creates an unfavorable situation for all parties involved. He characterized it as a “lose-lose-lose situation.”

Flytrex posits that a drone-based delivery system, operating remotely and depositing items directly into a customer’s backyard, offers a viable solution in these scenarios.

The potential market is substantial, especially within the U.S., where approximately two-thirds of the population resides in suburban locales. Bash stated that major cities, the primary focus of on-demand delivery services to date, represent a comparatively small segment of the overall market.

A Vertical Approach to Business

Flytrex is adopting a highly focused business strategy, beginning with the development of its hardware and the design of its service.

Leveraging Israel’s extensive experience in hardware development, computer vision, artificial intelligence, and cloud technologies, the company has engineered its own drones and the software necessary for their control.

Navigating the FAA certification process for its aircraft—Bash noted he is “standing in line with Lockheed, Boeing, and Amazon”—he deliberately avoids referring to them as “drones.”

“We are producing commercial airplanes, not drones,” he clarified, estimating that this rigorous process has added three to five years to the timeline for securing approval. The proliferation of drone manufacturers has led to a degree of commoditization. While Bash doesn’t entirely dismiss the possibility of utilizing hardware from other sources in the future, he believes the extended development timeline and proprietary software will make this unlikely in the near term.

“In the future, should a more cost-effective airplane become available, we would certainly consider it,” he added.

Beyond the “drone”—or its designated equivalent—Flytrex is constructing a comprehensive technology infrastructure and database. The company has mapped backyards within its service areas to identify safe and efficient drop-off locations, enabling customers to retrieve packages conveniently. Bash revealed that Flytrex has collected data on over 80 million backyards.

While Google Maps and similar services have mapped front doors, “we’ll have the back doors,” he stated.

Fleet Management and Operational Model

Complementing this is a cloud-based fleet management system designed to oversee drone operations. Flytrex intends to collaborate with a network of “couriers”—potentially the same individuals currently providing delivery services via traditional methods—who will be trained as “flight operators.” These operators will work through third-party companies to manage the drones. This model mirrors the contractor-based systems used by some on-demand transportation platforms.

Early indications suggest strong customer interest in the service. Flytrex launched its initial service in Reykjavik, Iceland, in 2017, and initiated a U.S. pilot program in Fayetteville, North Carolina, in September 2020. It has since expanded to Raeford, North Carolina. Since February 2021, order volume has increased more than tenfold, resulting in thousands of completed deliveries.

However, progress hasn’t been without challenges. Bash acknowledges that the service has been years in development and that obtaining approval is a complex undertaking. Even established companies like Amazon have experienced setbacks, recently navigating an FAA hurdle while also seeing the departure of a key executive and a scaling back of R&D efforts.

Furthermore, there remains considerable skepticism surrounding autonomous transportation technologies in general.

Despite these concerns, the shortcomings of existing delivery services and advancements in autonomous systems suggest that investment in this area could yield significant returns. The fact that major players like Amazon are exploring this space—either independently or as a service provider—underscores the importance of having alternative options for those who prefer not to rely solely on Amazon.

“We are committed to supporting companies that have the potential to change people’s lives for the better, and Flytrex’s impact on retailers and consumers alike fits that mission perfectly,” stated Eran Barkat, partner at BRM Group. “Drones are playing a key role in revolutionizing last mile delivery for communities around the world, and we are thrilled to support the Flytrex team as they take the future of food and household delivery to new heights.”